From a June 28 filing by the court-appointed receiver in the Zeek Rewards Ponzi-scheme case. “SP” stands for “Settling Party.” (Red highlights by PP Blog.)

URGENT >> BULLETIN >> MOVING: (UPDATED 8:05 P.M. EDT U.S.A.) From the standpoint of avoiding financial accountability, it may have become more difficult for serial scammers who foist HYIP scams on the international public to thumb their noses at law enforcement and the courts. The court-appointed receiver in the Zeek Rewards Ponzi scheme case has revealed the threshold dollar number used to determine who received emails offering a settlement: That number, according to filings by receiver Kenneth D. Bell, was only $1,000.

The lowness of the number could send shockwaves across the HYIP Ponzi universe. On well-known Ponzi-scheme forums such as TalkGold and MoneyMakerGroup, serial HYIP scammers routinely pooh-pooh court actions and claim that neither the government nor receivers will bother to seek recoveries from low-level players and “winners” in scams.

Confident that they’ll never be held accountable, some purveyors move from one HYIP fraud scheme to another.

In August 2012, the SEC described Zeek as a $600 million Ponzi- and pyramid scheme. Both the SEC and the receiver quickly were demonized on the Ponzi boards.

Docketed in the Western District of North Carolina yesterday, Bell’s filing makes it plain that he expects any net winner who received $1,000 or more to pay up — and there is no guarantee that the number could not go lower in the future. Beyond that, a provision of the settlement agreement frees the receiver effectively to force net winners who may have money frozen in NxPay “and/or any other payment processor” or bank to make those funds payable to the receivership estate.

Zeek used NxPay, AlertPay and SolidTrustPay. AlertPay (now Payza) and SolidTrustPay are longtime favorites of Ponzi purveyors and their shills on the fraud forums. Zeek was based in Lexington, N.C.

If the Zeek settlement stipulations as outlined by the receiver are approved or accented by the court, it would mean that Zeek’s serial HYIP players and their recruits could not hope to stymie law-enforcement agencies and the receiver by waiting them out and removing “profits” from the payment processors or banks at a later date.

At least 136 Zeek winners have agreed to settlements after being approached by the receiver, Bell said. Virtually all of the settlements have included a substantial discount on the order of 40 to 50 percent. The discount amounts, Bell has said, will enable the receivership to collect some money for Zeek victims without going to the additional expense of filing lawsuits.

Winners who cooperated early with the receivership may stand to gain much better deals than stragglers who potentially could be held accountable for more lucrative dollar sums if successfully sued. Zeek had more than 2 million user IDs, Bell has said. About 1 million affiliates paid money to Zeek, which may have a universe of tens of thousands of “winners.”

The $1,000 threshold in the early settlement emails was established after the receivership consulted with the SEC, according to a filing yesterday by Bell.

Here are a several examples of the existing settlement agreements, according to the June 28 filing (bolding added):

A Zeek winner of $1,254 has agreed to a settlement of $600 “to be paid within 7 days of the effective date of this agreement.”

A Zeek winner of $9,249 has agreed to a settlement of $4,500 “to be paid as follows: $375 a month for 12 months beginning in April 2013 (to be paid by the 25th of each month).”

A Zeek winner of $28,909 has agreed to a settlement of $22,000 “to be paid as follows: $6,000 within 15 days of the effective date of the agreement and then eight payments of $2,000 due on the 15th day of each following month.”

A Zeek winner of $114,000 has agreed to a settlement of “$47,500 to be payable on or before May 31, 2013.”

A Zeek winner of $170,440 has agreed to a settlement of “$84,981 to be payable in one payment of $23,165 on or before June 15, 2013 with the remainder ($61,770) to be paid by July 15, 2013 or in 10 equal consecutive monthly payments of $6,177.60 beginning on or before July 15, 2013 and to be paid by the fifteenth day of each following month.”

A Zeek winner of $176,000 has agreed to a settlement of “$88,000 to be paid within 7 days of the effective date of this agreement.”

As things stand, Bell has settled with winners of more than $3.2 million for better than $1.81 million. The “Settlement as % of Winnings” is listed as 56.12 percent in the June 28 filing.

Here is another example. A winner of $568,844 has agreed to a settlement of of $455,075 to be paid as follows: “$356,075 to be paid on or before July 15, 2013, then 6 consecutive monthly payments of $16,500 beginning August 15, 2013.”

For the sake of discussion, let’s say no settlement occurred with this Zeek investor and the receiver sued him for 100 percent or more. Let’s further say the investor hired an attorney and litigated with the receiver, instead of not defending the case and letting it go to a default judgment.

That litigation could be costly. I’ve seen receivers sue winners or recipients of ill-gotten gains and gain judgments against their homes and jewelry, for example. There also have been instances in which investors hide money in bids to avoid judgments, something that could trigger an international paper chase and drive up costs for the receivership while delaying restitution for victims.

So, I think it is prudent for the receiver to offer settlements, including ones that may appear to be generous to the SP — many of whom probably won’t recognize a “profit” because of litigation and tax expenses. In some cases, the court grind has lasted for years.

I am aware that some people believe there are no real victims in these schemes. That simply is not true. “Junior” could have enrolled his 85-year-old mother in a scam without her knowledge and placed her in his downline, thus engaging in “stacking” in a bid to scam the scammers and subjecting his mother to legal jeopardy.

If you think back to JSSTripler/JustBeenPaid, Frederick Mann was encouraging parents to enroll their children and grandparents to enroll their grandchildren. This creates a condition under which a 10-year-old child who should be concentrating on his or her next Little League at-bat could end up having to meet with lawyers and tax advisers because he/she effectively was being scammed by his/her own parents or grandparents — some of whom may have been trying to scam the scammers via downline stacking.

It appears to me that the receiver has contemplated these circumstances. I’m not sure if he fully understood the HYIP universe prior to his appointment. My guess is that he’s found himself scratching his head multiple times as the deviousness of these schemes came into fuller view.

Those who settle also are going to find they may have some serious problems with the IRS that will wipe out any savings they think they might have gained. The receiver should be reporting any discount to the IRS as forgiven debt which is taxable income, so if you owed $100,000 and negotiated for $50,000, it is conceivable that you have just realized a $50,000 gain for tax purposes. Even better, it goes without saying that the $100,000 was taxable income as well, and as it is the result of criminal activity our serial scammers cannot deduct any associated expenses. So the “net winner” of $100,000 could end up owing income tax on $150,000, after paying $50,000 back.

Granted this is a best (worst) case scenario, but very possible. Couldn’t happen to nicer people. I hope Ken Russo has H&R Block on speed dial!

Quick note: A person apparently unhappy with this story or the PP Blog’s overall Zeek coverage asserts this (carriage returns added):

______________________________________________________

Fact is Zeek was picked out and closed down because it was a threat to
the establishment. Who complained? Banks, brokerage firms, credit
unions, insurance companies….their customers were pulling money away
from them and into ZEEK, can’t have that! No consumers complained.

I know you don’t like the truth and facts most reporting these days
don’t but why don’t you try it you might like it! Go ahead dig into
the records why was ZEEK closed so FAST?

The fastest action ever taken on what’s called the largest ponzi
scheme. Why not one person was prosecuted and put in jail? Why was
Bidify and many other companies left alone?

______________________________________________________

From my point of view, this is like living the AdSurfDaily Ponzi scheme all over again — with the apologists’ narrative now shoehorned into Zeek. That makes it particularly distasteful, considering the ASD narrative was discredited long ago.

Wizzard7: The more pressing question this person should ask is, “Why am I such an idiot?”

A person who’s not self-reflective is going to seek external causes long before they go introspective for faults, and it’s MUCH easier to blame a faceless government and “the establishment” in order to sleep at night than to admit stupidity.

Quick note: From the universe of 136 settlements, there are a few with winners of less than $1,000. For example, a $900 winner settled for $400; a $569 winner settled for $300; an $844 winner settled for $450; a $633 winner settled for $400.

Whether the original amounts pursued exceeded $1,000 and were reduced because the SPs demonstrated lower winnings is unknown at this time.

As the story above notes, there is no guarantee that the receiver will not go below the $1,000 threshold.

It would be interesting to know how much downline stacking occurred within Zeek. Longtime readers will recall that the 1-percent-a-day AdViewGlobal scam, an AdSurfDaily knockoff that purportedly operated from Uruguay, blamed its demise in part on downline stacking. Put another way, the scammers claimed they were being scammed by their own members.

>>It would be interesting to know how much downline stacking occurred within Zeek. Longtime readers will recall that the 1-percent-a-day AdViewGlobal scam, an AdSurfDaily knockoff that purportedly operated from Uruguay, blamed its demise in part on downline stacking. Put another way, the scammers claimed they were being scammed by their own members<<

This is a good point and a possibility. But to my knowledge little was said or admitted about how much this had happened, but warnings about stacking were given. There was supposedly a tech dept who worked full time checking on this and other anomolies.

I do remember one call where Dawn briefly mentioned that someone had opened and stacked 100 accounts under different names and that they had been found.

K. Chang: A person who’s not self-reflective is going to seek external causes long before they go introspective for faults, and it’s MUCH easier to blame a faceless government and “the establishment” in order to sleep at night than to admit stupidity.

This is true regardless of whether the business or investment is legitimate or not. Robert Kiyosaki, in one of his books, wrote that the risk in any investment is with the investor and not the investment itself.

In other words, it is up to the person to do his own due dilligence. Then having done that, if they decide to go ahead and invest, then they are 100% responsible and should accept that responsibility for what happens.

John: Robert Kiyosaki, in one of his books, wrote that the risk in any investment is with the investor and not the investment itself.

In other words, it is up to the person to do his own due dilligence. Then having done that, if they decide to go ahead and invest, then they are 100% responsible and should accept that responsibility for what happens.

Wonder if Profitable Sunrise pitchman John Schepcoff was channeling the claim you attribute to Kiyosaki?

Too bad Larry King is semi-retired. If his CNN show were still on, Schepcoff might have stood a chance of getting booked to share his profundities.

I don’t know about you, John, but I sort of read Schepcoff’s take as the magical construction either of a “sovereign citizen” or of someone who has been heavily influenced by “sovereign” lamp-rubbing.

In covering HYIP scams, it’s been my experience that the pitchmen seem to become real keen on “personal responsibility” after they’ve led the lambs to the slaughter and a “program” goes missing or ends up in court.

Too bad Larry King is semi-retired. If his CNN show were still on, Schepcoff might have stood a chance of getting booked to share his profundities.

I don’t know about you, John, but I sort of read Schepcoff’s take as the magical construction either of a “sovereign citizen” or of someone who has been heavily influenced by “sovereign” lamp-rubbing.

In covering HYIP scams, it’s been my experience that the pitchmen seem to become real keen on “personal responsibility” after they’ve led the lambs to the slaughter and a “program” goes missing or ends up in court.

Patrick

A scam is a scam no matter what the pitchmen might say afterwards. However, even legitimate businesses can fail In fact, Kiyosaki also mentions only 5% go on to succceed.

It is true some are led like lambs to the slaughter and then it is a case of once bitten twice shy. However, Kiyosaki’s advice is talking about business in general. Ignorance can be very costly, which is why he advocates financial education.

I like the expression ‘sovereign lamp rubbing’ which shows that these people are deluding themselves and others.